Living the Dream: Retiring at 30, Enjoying Financial Freedom

8 min read. Updated November 17, 2023.

If offered the opportunity, most people would love to retire early and have a happy future. For young workers, only a few years into their career, early retirement may not be on their agenda. But, can you retire at 30 with a million in your bank account?

It's no secret that millions of Americans are in debt; the average American household has over $15,000 in credit card debt alone. And with the inflation, we are reminded that retiring early takes more than wealth and job security.

This can make the thought of early retirement and achieving financial independence seem like a pipe dream, mainly because you need enough money saved to replace your income and cover your expenses.

Do you want to retire early? Have you already thought about which age you'd like to be in retirement by? Reaching it needs more than a magic number.

The following article describes what is important about planning a successful early retirement.

The banner ads and some links in this blog post are affiliate links. If you click on a link and join, I may receive a referral commission, at no extra cost to you. All opinions remain my own and each company featured is individually selected.

 

Retiring early: 5 steps to Financial Independence

1. Create a Budget

Creating a budget is the first step to taking control of your finances. This involves determining your monthly income and expenses, and tracking where your money is going. Do take a moment to sit down and review this; the process is easy and painless. You can also download our Budget Templates.

Once you have a clear picture of your spending patterns, you can start making changes to keep more of your money in your pocket. For example, you might cut back on dining out by cooking food at home instead or reduce shopping for new clothes, and redirect that money toward savings or debt repayment.

Read also The 50/30/20 Rule: How to Budget Your Money More Efficiently

2. Invest in Yourself

The second step is to start investing in yourself. This means taking the time to learn about personal finance and investment. There are tons of online resources available - books, blog posts, podcasts, courses - that can help you get started on your journey to gain financial independence.

Sadly, this is not taught to school children; even just one lesson per year on how to invest would be highly beneficial. But we're here to help:

• Check out the Control All Finances eBook Collection;

• Have you seen the Best Personal Finance Podcasts to Listen To;

• Worried about starting a stock market portfolio? What about the Top 5 Reasons to Start Investing Today;

• Access our favorite resources and toolkits.

3. Pay Off Your Debt

The third step is to pay off your debt - a must before retiring. This includes any credit card debt, student loans, or other debts that you may have. One of the best ways to do this is to create a Debt Snowball plan.

This involves listing your debts from smallest to largest and focusing on paying off the small debts first. Once those are paid off, you can focus on the larger ones.

More details here 10 Easy Ways to Pay Off Debt

4. Invest Your Money

Now that you've got your budget figured out and you can bring in more money than you spend, it's time to start investing that money wisely.

This can be done through various methods, such as real estate investing, stock market investing, or even simply savings for retirement in a 401k or IRA account.

The important thing is to start investing now so that your money has time to grow. The sooner you start, the better off you'll be in the long run. You may need to consult a finance professional to help with your retirement plans.

Want to invest in bonds? Read first Understanding Risk-Free Assets: A Beginner's Guide

5. Live Below Your Means

The fifth and final step is to live below your means. This means being mindful of your spending and only purchasing what you need - not what you want. It may take some time to adjust your lifestyle, but it will be worth it to retire earlier. Car expenses might represent a bigger slice of your household budget than you may realize; consider this too. 

These five steps are not easy, but they are certainly achievable with some hard work and dedication. If you're ready to take control and achieve financial independence, then let's get started!

More about it in our eBook How To Achieve Your Financial Independence.

 

Let's get critical: where there's smoke...

You may have heard of FIRE, which stands for Financial Independence Retire Early. The term FIRE came from a 1992 book called Your Money or Your Life written by Vicki Robin and Joe Dominguez.

In my opinion, saving aggressively (at least half of your net income), the main idea of the fire movement, is unachievable for many people, especially if you have a family. What's more, this goal could be overly simplistic because there is no exact timetable for when retirement will take place.

The math behind the movement Financial Independence Retire Early

A “normal” retirement path is working 40 years, with savings and investing 10% to 20% of your annual income in a well-diversified fund that returns an annual average of 8%.

The benefits of compounded returns on investment make it easy for you to generate value on your savings for retirement. But the key here is that your portfolio needs years to build wealth.

But retiring at a younger age and applying the FIRE principles need a radical lifestyle u-turn, saving aggressively, and strict spending control. Logically, the earlier you retire, the more cash you'll need to have saved to fund your new life.

Whilst someone in their 60s, who managed to build a diversified portfolio over the years, will be comfortable with a million in the bank; somebody in their 30s would need to save a much higher number to enjoy early retirement.

 

Saving for retirement early is crucial for most people

Many Americans, especially millennials, are struggling to save for retirement, says a recent survey. With the rise of student debt, global inflation, and an increase in housing costs, it's no surprise that many people are finding themselves unable to save and invest.

It's important to remember that even if you have a 401k plan or another type of employer-sponsored retirement plan (ESRP), it is still crucial to begin allocating savings for your future as soon as possible.

Your age would also be a factor in your investment vehicles, as when you have years ahead of you, you can take more risks, potentially leading to higher returns.

The bottom line is that you are expected to have saved a minimum of a million in the bank to enjoy your early retirement savings.

How much money should you have to retire in your 30s?

Let's be honest, fire lifestyle or not, it is nearly impossible to be free to retire at such a young age, without having inherited huge estates or making millions in your 20s for example.

However, successful entrepreneurs with their own businesses may have already generated substantial earnings, although most choose to continue working to maximize their income for added security.

Age 40 is somewhat more realistic, particularly for somebody who managed to invest in a stock portfolio early, or someone who applied the fire guidelines to their expenses and income the year they started their work life. In these two scenarios, they could have well over a million in the bank.

Whilst there is no magic number for how much you should have to be retired with comfortable cash security, there are some general guidelines for each milestone in your life. Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle when you retire.

Here is a breakdown of the average retirement savings funds by age:

• Age 30: $14,000

• Age 40: $116,000

• Age 50: $383,000

• Age 60: $1.14 million

• Age 67: $2.41 million

The above however implies that you'd be working until retirement age.

You'll have to make some sacrifices if you want to retire early

Being retired with enough money is a step-by-step process that takes years of planning. You'll have to give up some luxuries and comforts that the average person takes for granted.

You'll also likely have to work very hard to accumulate savings and investments. Finally, if you want to retire when you reach 30 or 35 years old, act now and review your annual expenses, save and invest, and prepare the funds to replace your income.

 

It's important to consider the psychological impact of early retirement

The truth is that there are many life benefits associated with retiring early, but it's important to also consider the psychological impact of quitting your job at an early age.

As you might imagine, there are both positive and negative implications. Some may find themselves struggling with social isolation or depression after leaving their company.

Others may experience a sense of freedom they haven't felt since they were children. In either case, you must prepare yourself mentally for these changes before making any rash decisions about your plans.

 

You could learn from other people who have retired early

While you're working on your path to early retirement, it can be helpful to learn from the experiences of others. Each year, many take that leap of faith; join the relevant forums, or read blogs to see what some say. Ideally, reach out to people you know to avoid the ''he says, she says'' stories!

 

Early retirement is not easy, but it is possible with careful planning

Retire early is a big deal, and it’s important to take time to consider your options, review funds, investments, and savings; and make sure that you are ready for the changes that will come with your new lifestyle.

It isn't enough to just have a plan in place; you also have to be able to stick with it no matter what - keeping in mind inflation. If you're going to take early retirement, make sure that it's something you can maintain for years on end - the last thing you want is an unstable income situation that forces you back into work again!

You also need to think about how this change might affect not only yourself but also those around you as well.

An aspect often overlooked is healthcare costs. Generally, Medicare is available for people age 65 or older; if you manage to secure early retirement, this is something you must factor in when projecting your medical expenses.

Final words

You can retire early if you're willing to put in the work and dedication to plan it. You surely need sound investments that will generate income year after year - and cover your costs at a minimum.

There are plenty of resources out there that provide advice on how to get started with early retirement. You should also talk to your friends and family members about their experiences with retirement planning so that they can offer insight into what works (and what doesn't). Ultimately, though, it all comes down to one thing: saving money!

No Financial Advice. This article does not provide financial advice and has been prepared without taking account of any person’s investment objectives, financial situation, or particular needs. eToro (Europe) Ltd. is a Financial Services Company authorized and regulated by the Cyprus Securities Exchange Commission (CySEC) under license # 109/10. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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